Disaster recovery a lesson in planning

A wide swath of barren land cuts through the forested hills of Monson. It looks as if a half-mile-wide steamroller pummeled through and impressed itself on the landscape.

It has been a year and half since one of the worst tornadoes ever tore through Central Massachusetts, and some small businesses in Monson have yet to fully recover. Others have yet to even reopen.

Daniel W. O’Connor, president of Daniel O’Connor & Sons, said he returned to work the day after the June 1, 2011, disaster to find three of the five sheds in which his Bethany Road business manufactured ski equipment had been swept away. A lot of the tools he knew he had collected over 30 years in business had just disappeared.

The damage was eventually assessed in the six figures, and it took six months before his sheds were rebuilt.

“I’ve got back about 80 percent of the value of the damages,” said Mr. O’Connor, when asked about his experience in dealing with his insurance provider. “Twenty percent still hasn’t been received.”

Lots of other small businesses were similarly affected by the disaster, including Maria’s Pizzeria & Seafood across town at 52 Main St. Unlike Mr. O’Connor, however, owner Maria Markopoulos of Paxton was able to fully recover all $15,000 worth of damages to her business from her insurance provider.

Ms. Markopoulos said although customers in her store were watching television coverage of the storm, they had no warning that the tornado was headed directly for them.

“There was golf-ball sized hail, and then there was a period of calm before the chaos,” she said. The tornado broke the pizzeria’s awnings and chandelier, and blew out all the windows. Nobody was injured, and her business avoided a direct hit.

Unfortunately, others have been far less fortunate.

Ken Katz, property risk control director with Hartford-based Travelers Cos. Inc., says the American Red Cross found that 45 percent of businesses do not reopen their doors after a serious event such as hurricane. He believes a big part of the rate of failure was due to lack of preparation.

At the U.S. Chamber of Commerce Small Business Summit last May in Washington, D.C., 302 small-business owners were surveyed by Travelers. When asked if they had an adequate business continuity plan, almost half of the respondents said, “No.”

Mr. Katz said he found the results startling because, alongside insurance, a business continuity plan is crucial to the survival of a business when disaster strikes. Such a plan, he said, has four main elements: conduct a risk assessment, conduct a business impact assessment, plan for prevention and mitigation, and practice execution in case a disaster strikes.

“If you’re not prepared and you don’t know what you need to do tomorrow, then you will find that the clock is running because income isn’t coming in, customers begin to look elsewhere, beginning on day one, and you don’t have a plan to capture those people,” he said. “The other component is you don’t know what to recover first. You can’t prioritize and direct attention to the appropriate places, because you haven’t invested the time in identifying those core components.”

Many small businesses buy disaster insurance as their main form of preparation. But Mr. Katz said if business owners were neither aware of their plans nor the extent of their coverage, they have a reduced chance of survival — despite having insurance.

“It is the equivalent of not even having a plan,” he said.

“Insurance is only one of many components to the plan you have in place,” said Matthew Bordonaro, director of corporate communications at Travelers.

Dennis McCurdy, owner and founder of The McCurdy Group, an insurance agency based in Sturbridge, felt there would be fewer negative impacts on businesses if people were more proactive.

“We are a society of procrastinators, and we only want to do things when in crisis,” he said.

Mr. McCurdy said some of his clients don’t have enough time to have lunch with him once a year to review their plans.

“People really need to sit down with their agents and do a good review every year. It’s a two-way partnership,” he said.

Mr. McCurdy, who has been in the insurance industry for 37 years, said many of the common problems that small businesses struggle with following a disaster are avoidable. These include the difficulties small businesses can face in proving their losses to insurance providers.

“If owners took the time to inventory everything in their commercial business, by taking photographs and pre-emptively agreeing on the value of everything with their insurance providers, then both would avoid a dispute.”

He acknowledged that some small businesses struggle to break even and few want to pay for insurance premiums.

He suggested owners avoid going on expensive vacations and instead set aside emergency funds. Mr. McCurdy said, “A business is a livelihood. If you lose it, you lose everything.”

About 57 percent of the 302 small-business owners surveyed by Travelers felt only somewhat, or not very confident, that they had the appropriate insurance to cover against insurable risks that might result in large financial losses.

For Mr. McMurdy, after seeing countless businesses leveled and dozens of livelihoods torn in his many decades in the industry, the risks far outweigh the costs of planning and preparing.

For him, the challenge is getting small businesses to see disaster preparation in the same light.